A consumer proposal is an offer you make to your creditors to settle your debts. The offer can be to pay them a percentage of what you owe, to extend the time to repay, or both. If they accept the offer, you pay them under the terms of the consumer proposal.

If you meet the conditions in the proposal, you’re released from your debts (or at least most of them; we explain this shortly).

To make a consumer proposal, you work with a licensed insolvency trustee. This is a professional licensed by the government to help people with debt problems.

The insolvency trustee deals with your creditors. They file the paperwork. They may have to sell some of your assets (things you own) to pay off your debts. The whole process can take up to five years.

So why make a consumer proposal rather than declaring bankruptcy?

Two main reasons. First, you get to keep more of your property than if you go bankrupt. Second, while a consumer proposal will hurt your credit score, it won’t do so for as long as declaring bankruptcy will.

Not everyone is eligible to make a consumer proposal. For starters, you must be “insolvent or bankrupt.” To qualify as “insolvent,” you must live in or own property in Canada and owe at least $1,000 to creditors. Plus, you must meet one of the following criteria:

• you can’t pay your debts as they come due
• you’ve stopped paying your debts
• the value of your property wouldn’t cover all your debts

You can’t make a consumer proposal if you owe more than $250,000 (not including a mortgage on your home).

If you’re going through bankruptcy proceedings and you make a consumer proposal, your bankruptcy is cancelled. Any property you gave up in your bankruptcy is returned to you.

Some types of debt can’t be included in a consumer proposal. These include:

• secured debts (for example, a loan secured by collateral)
• debts arising from spousal or child support payments
• court fines or penalties
• debts arising from fraudulent activity
• student loans, if it’s been less than seven years since you’ve been out of school

Some common types of debt that can be included in a consumer proposal are:

• unpaid credit card debt
• lines of credit
• personal loans
• tax arrears
• debts owed to collection agencies
• student loans, if it’s been more than seven years since you’ve been out of school

You can’t pick and choose. All debts that are eligible must be included in a consumer proposal.

Here are the steps involved in making a consumer proposal.

Step 1. Gather your financial information

Step 2. Meet with a licensed insolvency trustee

Step 3. File the consumer proposal

Step 4. Wait for a response from your creditors

Step 5. Begin making payments under the proposal

Step 6. Attend two counselling sessions

To come up with a reasonable offer for your creditors in a consumer proposal, you must fully understand your financial position.

Start by listing all of your assets (what you own) and debts (what you owe).

Then you should make a budget. A budget shows how much money you expect to get and spend over a period of time. We guide you through the steps involved. See how to make a budget.

Only a licensed insolvency trustee can file a consumer proposal. You’ll need to meet with one, who will guide you through the process.

The federal government’s website includes a way to search for an insolvency trustee in your area. Find a licensed insolvency trustee.

Your insolvency trustee will file the consumer proposal with the government office that oversees bankruptcies. Once the proposal is filed, the trustee distributes it to your creditors.

Creditors have 45 days to accept or reject the proposal. Any creditor who doesn’t respond is said to have accepted it.

If creditors holding 25% or more of your total debt reject the proposal, all creditors must attend a meeting. For your proposal to pass, creditors holding a majority of your debt must vote in favour of it at the meeting.

If your consumer proposal is approved, you begin making payments to your insolvency trustee. The trustee then distributes the money to your creditors under the terms of the proposal. A portion of the payments is also put towards the insolvency trustee’s fee.

If your proposal is approved, you must attend two counselling sessions with your insolvency trustee. The first session must be held within two months of the proposal being approved. The second session must be held within seven months of approval.

We dig deeper into all the steps involved. See our in-depth information on consumer proposals.

If your debt situation has you considering a consumer proposal, these agencies may be able to help.

Credit Counselling Society of BC

A non-profit society that helps people better manage their money and debt.

Call 1-888-527-8999Send an emailVisit website

Office of the Superintendent of Bankruptcy

Oversees consumer proposals and bankruptcies.

Call 1-877-376-9902Visit website

Getting legal advice can help you decide if a consumer proposal is the right option for you.

Lawyer Referral Service

Helps you connect with a lawyer for a complimentary 15-minute consult to see if you want to hire them.

Call 1-800-663-1919Visit website

Access Pro Bono's Free Legal Advice

Volunteer lawyers provide 30 minutes of free legal advice to people with low or modest income.

Call 1-877-762-6664Visit website

People’s Law School

See more options for free or low-cost legal help.

Visit website